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Without question, the global financial crisis exposed some weaknesses in the REIT model. The distribution requirements in most REIT regimes, which require the majority of earnings to be paid to shareholders each year, made it difficult for REITs to conserve cash to weather the storm.

Several owners that have well-leased Class A office buildings with strong credit in this market are considering the right time to begin selling their assets. The investment community has been kind to office buildings that have term, credit, and a compelling story behind them by pricing these assets with aggressive cap rates and per-square-foot pricing above replacement cost.

Sale-leasebacks–and generally, leasing rather than owning real estate–are becoming increasingly popular among our federal and state government entities. As with corporate America, government at the federal and state levels is finding that it may have better and more essential uses for their capital than having it tied up in real estate ownership, especially in these challenging times.

With the decline in values and transaction volume in commercial real estate, the traditional private real estate fund structure is under great pressure.

I have heard “this economy is on steroids” too many times at conferences this year. Speakers have typically made this comment when talking about federal efforts to contain some of the worst effects of the financial crisis. Whether it is stimulus spending or TARP money, the thinking is that these federal dollars are simply performance enhancing drugs. It is as if these investors are dismissing the growth we are seeing out there today, painting it with an asterisk as if it is not a true achievement. These speakers have the analogy reversed.

There are times when a developer may want to sell one of his properties and invest its proceeds in another he or she owns. In the past the IRS forbade 1031 exchanges in such cases; however, today there are specific, although narrow, paths that are accepted by the tax advisory community. The acceptable strategy is known as an Advanced Construction Exchange and has been upheld by private letter rulings and delineated in a Revenue Procedure.

Although Moody’s does not expect investment-grade retail REITs to see any material changes to their current ratings and rating outlooks, non-investment grade retail REITs’ ratings may be pressured. Moody’s has a stable outlook on the majority of its rated retail REITs, but maintains a negative outlook on the overall real estate fundamentals of the retail REIT sector.